Question 1

Figure 16-12  
-Refer to Figure 16-12. If this firm minimized cost, how much output will it produce?

Accepted Answer

The answer of Figure 16-12  
-Refer to Figure 16-12....

Question 2

A monopolistically competitive firm

Accepted Answer

A)  charges a price that is equal to marginal cost. 
B)  experiences a zero profit in the long run. 
C)  produces at the efficient scale in the long run. 
D)  All of the above are correct. 
A)  charges a price that is equal to marginal cost. 
B)  experiences a zero profit in the long run. 
C)  produces at the efficient scale in the long run. 
D)  All of the above are correct.

Question 3

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)  a large number of sellers 
B)  firms are price takers 
C)  free entry into the market 
D)  a differentiated product 
A)  a large number of sellers 
B)  firms are price takers 
C)  free entry into the market 
D)  a differentiated product

Question 4

A firm has the following cost structure:   If this firm is in a typical perfectly competitive market, in the long run it will likely produce

Accepted Answer

A)  8 or fewer units of output. 
B)  10 units of output. 
C)  more than 10 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell. 
A)  8 or fewer units of output. 
B)  10 units of output. 
C)  more than 10 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell.

Question 5

Figure 16-2. The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-2. If the average variable cost is $26 at the profit­maximizing quantity, and if the firm's profit is $40 at that quantity, then its fixed costs amount to

Accepted Answer

A)  $12. 
B)  $152. 
C)  $200. 
D)  $240. 
A)  $12. 
B)  $152. 
C)  $200. 
D)  $240.

Question 6

There are four basic types of market structure.

Accepted Answer

A) True 
 B)False

Question 7

In which of the following product markets are we likely to observe the largest amount of advertising?

Accepted Answer

A)  markets with highly differentiated products 
B)  perfectly competitive markets 
C)  markets in which industrial products are sold 
D)  markets in which there is very little difference between different firms' products 
A)  markets with highly differentiated products 
B)  perfectly competitive markets 
C)  markets in which industrial products are sold 
D)  markets in which there is very little difference between different firms' products

Question 8

When a firm exits a monopolistically competitive market, the individual demand curves faced by all remaining firms in that market will

Accepted Answer

A)  shift in a direction that is unpredictable without further information. 
B)  shift to the right. 
C)  shift to the left. 
D)  remain unchanged. It is the supply curve that will shift. 
A)  shift in a direction that is unpredictable without further information. 
B)  shift to the right. 
C)  shift to the left. 
D)  remain unchanged. It is the supply curve that will shift.

Question 9

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

Accepted Answer

A)  marginal revenue will equal average total cost. 
B)  price will exceed marginal cost. 
C)  marginal cost will exceed average revenue. 
D)  average variable cost will be declining. 
A)  marginal revenue will equal average total cost. 
B)  price will exceed marginal cost. 
C)  marginal cost will exceed average revenue. 
D)  average variable cost will be declining.

Question 10

Scenario 16-6
Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.
-Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

Accepted Answer

A)  business-stealing externality, which harms producers. 
B)  business-stealing externality, which benefits producers. 
C)  product-variety externality, which harms consumers. 
D)  product-variety externality, which benefits consumers. 
A)  business-stealing externality, which harms producers. 
B)  business-stealing externality, which benefits producers. 
C)  product-variety externality, which harms consumers. 
D)  product-variety externality, which benefits consumers.

Question 11

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Accepted Answer

A)  Firms will exit this industry. 
B)  Firms will enter this industry. 
C)  This firm will continue to earn positive economic profits. 
D)  This firm will incur losses. 
A)  Firms will exit this industry. 
B)  Firms will enter this industry. 
C)  This firm will continue to earn positive economic profits. 
D)  This firm will incur losses.

Question 12

Figure 16-2. The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

Accepted Answer

A)  $16. 
B)  $24. 
C)  $32. 
D)  $36. 
A)  $16. 
B)  $24. 
C)  $32. 
D)  $36.

Question 13

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.  
-Refer to Table 16-2. Which industry is the most competitive?

Accepted Answer

A)  Industry J 
B)  Industry K 
C)  Industry L 
D)  Industry M 
A)  Industry J 
B)  Industry K 
C)  Industry L 
D)  Industry M

Question 14

When a market is monopolistically competitive, the typical firm in the market is likely to experience a

Accepted Answer

A)  positive profit in the short run and in the long run. 
B)  positive or negative profit in the short run and a zero profit in the long run. 
C)  zero profit in the short run and a positive or negative profit in the long run. 
D)  zero profit in the short run and in the long run. 
A)  positive profit in the short run and in the long run. 
B)  positive or negative profit in the short run and a zero profit in the long run. 
C)  zero profit in the short run and a positive or negative profit in the long run. 
D)  zero profit in the short run and in the long run.

Question 15

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale. If this law were to pass and be enforced, we would expect that monopolistically competitive firms would

Accepted Answer

A)  see their profits increase. 
B)  break even. 
C)  lose money. 
D)  not really be affected by the law. 
A)  see their profits increase. 
B)  break even. 
C)  lose money. 
D)  not really be affected by the law.

Question 16

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. In response to the situation represented by the figure, we would expect

Accepted Answer

A)  new firms to enter the market. 
B)  some of the firms that are currently in the market to exit. 
C)  this firm's profit to move from its current value toward a positive value. 
D)  None of the above are correct. 
A)  new firms to enter the market. 
B)  some of the firms that are currently in the market to exit. 
C)  this firm's profit to move from its current value toward a positive value. 
D)  None of the above are correct.

Question 17

The product-variety externality states the benefits to consumers from the introduction of a new product.

Accepted Answer

A) True 
 B)False

Question 18

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Accepted Answer

A)  perfect competition only 
B)  perfect competition and monopolistic competition only 
C)  perfect competition, monopolistic competition, and monopoly 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run. 
A)  perfect competition only 
B)  perfect competition and monopolistic competition only 
C)  perfect competition, monopolistic competition, and monopoly 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run.

Question 19

Which of the following is most likely sold in a monopolistically competitive market?

Accepted Answer

A)  sports drinks 
B)  cable TV programming 
C)  a share of McDonald's stock 
D)  sunglasses 
A)  sports drinks 
B)  cable TV programming 
C)  a share of McDonald's stock 
D)  sunglasses

Question 20

A firm can signal the high quality of its product by

Accepted Answer

A)  spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B)  spending a large amount of money on advertising. 
C)  getting a patent for the product. 
D)  not worrying about getting a patent for the product. 
A)  spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B)  spending a large amount of money on advertising. 
C)  getting a patent for the product. 
D)  not worrying about getting a patent for the product.

Exam 16: Monopolistic Competition

Figure 16-12 -Refer to Figure 16-12. If this firm minimized cost, how much output will it produce?

A monopolistically competitive firm

Which of the following is not a characteristic of monopolistic competition?

A firm has the following cost structure: If this firm is in a typical perfectly competitive market, in the long run it will likely produce

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average variable cost is $26 at the profit­maximizing quantity, and if the firm's profit is $40 at that quantity, then its fixed costs amount to

There are four basic types of market structure.

In which of the following product markets are we likely to observe the largest amount of advertising?

When a firm exits a monopolistically competitive market, the individual demand curves faced by all remaining firms in that market will

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. Which industry is the most competitive?

When a market is monopolistically competitive, the typical firm in the market is likely to experience a

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale. If this law were to pass and be enforced, we would expect that monopolistically competitive firms would

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In response to the situation represented by the figure, we would expect

The product-variety externality states the benefits to consumers from the introduction of a new product.

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Which of the following is most likely sold in a monopolistically competitive market?

A firm can signal the high quality of its product by

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average variable cost is $26 at the profitmaximizing quantity, and if the firm's profit is $40 at that quantity, then its fixed costs amount to